State and Local Public Policy from the Mercatus Center

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BP Now Breaking Windows?

[In the] 1979 comedy from the Monty Python team, the hero ends up whistling the song “Always Look on the Bright Side of Life” despite having his hands nailed on each side of a cross.

It seems British Petroleum took that lesson to heart. Fortunately, the company found the bright side of the oil spill, which sounds a lot like Bastiat’s broken window fallacy. Planet BP, an online internal publication sent “reporters” to the gulf, and interviewed some locals who still love the big sunflower. From the WSJ:

“Much of the region’s [nonfishing boat] businesses — particularly the hotels — have been prospering because so many people have come here from BP and other oil emergency response teams,” another report says. Indeed, one tourist official in a local town makes it clear that “BP has always been a very great partner of ours here…We have always valued the business that BP sent us.”

Milton Friedman called this the most persistent economic fallacy in history. Moving money around isn’t the same as growing the economy. The broken window fallacy lauds simple currency exchanges to replace senseless destruction, instead of focusing on growing the total productivity. It’s like running in place, but believing you’ll win a race.